In-kind contribution

This FAQ about in-kind contributions (IKC) is mainly based on experiences of the European XFEL GmbH.

What are in-kind contributions?
How can in-kind contributions be valued?
What are the benefits of in-kind contributions?
What are the risks of in-kind contributions?
How do I proceed in funding by in-kind contributions?
Which topics could a document of rules and procedures for in-kind contributions contain?
How do I make sure that an in-kind contribution will be successful?
How do I manage in-kind contributions?
Which challenges you have to cope with in-kind contributions?
Which specific finance and controlling aspects of in-kind contributions do you have to be aware of?
Examples and experts on in-kind contributions

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What are in-kind contributions?

In-kind contributions are one type of support for nonprofit organizations. Conversely to cash contributions, in-kind contributions represent the provision of goods or services to an organisation by one of its members, valued in monetary terms according to rules agreed upon beforehand by the members of the organisation in the statutes or bylaws, and accounted for as part of the member’s contribution to the budget.
An in-kind contribution can consist either of the direct provision of a tangible asset to the infrastructure or of expenditure incurred directly by the contributor, which benefits the infrastructure and satisfies its objections. They include goods, use of services and facilities, professional services or expertise in the form of staff time, provision of or access to equipment, special materials. They are regarded as necessary to carry out the tasks and achieve the goals commonly agreed by the members. They would have to be paid for if they were not provided by a member. The amount of the contribution should be reported according to the accounting rules agreed upon by the members in the statutes or bylaws of the organization. These rules may rely on the cost actually incurred by the contributor or on standard cost equivalents defined to ensure fairness among partners (this applies in particular to the accounting of personnel costs). From the point of view of the research infrastructure, in-kind contributions represent a stream of revenue, though they are not monetary in-kind contributions are commonly used in RI consortia and may represent a large portion of the RI's revenue; indeed, this type of contribution often enjoys a tax treatment which is more favorable than in the case of cash contributions (i.e. expenditures directly incurred by the consortium) and thereby allow cost optimization.
In-kind donations build relationships within an organization as the provider can support the mission and programs without investing cash. Keeping a provider informed of what is done with their in-kind contribution encourages them to take on a greater role in programs.
In-kind contributors become partners during the construction phase in the sense that they take over the responsibility of tasks and equipment, and the good interfacing with other parts of the project. This partnership must also be effective in the solving of difficulties.

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How can in-kind contributions be valued?

Normally, in-kind contributions are goods or services that an receiving organization would need to purchase and are contributed instead by the entities who form the consortium of contributors.
In the conceptual phase of the project, a team of experts prepares the Technical Design Report (TDR) which defines in as much technical details as possible all components which are part of the construction. Based on the TDR, the cost estimate of the project is then made in a bottom-up process. This cost estimate (valued at year Y0) becomes the reference cost limit for the future proposals of in-kind contributions.
The amount of the contribution should be reported according to the accounting rules agreed upon by the members in the statutes or bylaws of the organisation. These rules may rely on the cost actually incurred by the contributor or on standard cost equivalents defined to ensure fairness among partners (this applies in particular to the accounting of personnel costs).Prior condition is determining a fair market value.

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What are the benefits of in-kind contributions?

Benefits for the project
It has been shown that IKCs are more generously committed than cash contributions because:

  • It can delegate both its technical and costs risks and management responsibilities
  • As compared to industrial suppliers, in-kind contributors have a common interest in successful results and thus work together in a collaborative spirit
  • This facilitates the transfer of know-how and experiences available at the shareholders / partner institutes in specific technology to the project
  • The shareholders expect a gain of generation of jobs in their home country

Benefits for the contributing institute/country

  • The contributor can implement its own know-how
  • The contributor can develop its experience to participate in future projects
  • It facilitates the involvement of national laboratories or domestic industry in relation to challenging tasks and sharing in new technology, thus providing some “return money” to the country
  • It can positively develop its image and its reputation

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What are the risks of in-kind contributions?

A risk assessment should be made before allocating IKCs. Quantifying a risk is evaluating the probability (P) of its occurrence and the severity (S) of its impact on the project (difficulties, delay, cost overrun). The product PxS defines the criticality of the risk. Attempts to mitigate highest critical risks should be made.
Risks can be sorted out in four categories: 

  • Risks concerning the environment
    • Risk of instability of project requirements
    • Risk of difficulties related to the collaboration
    • Risk on project financing
    • Risk of important delay in public procurement procedure
    • Risk of regulation changes: Public Procurement Code, safety, environment
    • Risk related to contract writing: administrative and technical clauses
    • Risk related to project acceptance by the social and human environment
    • Risk of natural incidents
    • Risk of political or national events
  • Scientific and technical risks
    • Risk of badly expressed or badly understood needs
    • Risk of change of scientific needs after project start-up
    • Risk of missing or incomplete specifications
    • Risk of specifications difficult to implement, of product too complicated
    • Risk that the product is difficult or impossible to test
    • Risk of technical solutions innovative and not proved
    • Risk of technical solutions beyond limits (absence of safety margins)
    • Risk of technical solutions out of date and put in question during the project
    • Risk of qualification procedures unsuitable
    • Risk of unavailable components
    • Risk of new safety rules difficult to implement
  • Risks concerning the manufacturing
    • Risk of bad choice of contributor
    • Risk of business failure in the subcontractor
    • Risk of withdrawal of the contributor in concerned activity
    • Risk of lack of motivations of the contributor
    • Risk of reluctance of the contributor concerning changes in the project
    • Risk of monopolizing situation, of unlawful combine, of limited or unfair competition
    • Risk of tender underestimating the work load or the technical difficulties of the product
    • Risk related to the project management team: permanence, expertise
    • Risk related to the engineering team: availability, expertise
    • Risk of inadequate industrial organization
    • Risk of bad Quality Assurance system
    • Risk of bad understanding the objectives
    • Risk of bad understanding specifications or drawings (language, units, custom uses, standards)
    • Risk of hiding information, results
    • Risk of useless or low value results
    • Risk that the project is dragging out without results
    • Risk of legal conflict
  • Human and organizational risks
    • Risk of lack of experience of the project leader
    • Risk on the expertise of manpower allocated to the project
    • Risk on the permanence of manpower
    • Risk that the project team is unaware of codes or regulations
    • Risk of lack of experience of the project team in Quality Assurance issues
    • Risk of missing or inadequate specifications
    • Risk of missing project reviews, of a review that went off badly
    • Risk of inadequate or incoherent procedure of project control
    • Risk of missing or incomplete progress report
    • Risk of missing records of contacts with the industry
    • Risk of human conflict with the industry
    • Risk of bad negotiation with the industry
    • Risk on the definition of internal responsibilities: badly identified or defined, too weak
    • Risk that the time schedule foreseen is not feasible or inconsistent
    • Risk of decision delay too long
    • Risk of short-circuit in the decision chain
    • Risk of incompatibility or conflict between important actors of the project
    • Risk of rivalry between collaboration labs
    • Risk of bad spreading of information, of lack of transparency
    • Risk of degradation of social atmosphere in the labs, lack of motivation
    • Risk of instability of institute’s director : change of objectives, of strategy


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How do I proceed in funding by in-kind contributions?

The steps below should support you at the IKC-funding process.

1. To be aware of benefits and risks
The project team has taken the stock in in-kind contributions. The next step is to evaluate the benefits and risks. If the risks dominate in your project or infrastructure you will abandon in-kind contributions.

2. Define basic rules and procedures for in-kind contributions
In case of in-kind contributions as suitable funding it is advisable to define basic rules and procedures. Please be aware if this technical document is quoted in the convention or final act, only a few elementary laws should be listed, especially if it is an annex of the convention because it is more difficult to change documents signed by government representatives in contrast to a document signed by the level of the council. If you need further definitions establish an additional document.

3. Establish an in-kind Review Committee (IKRC)
It is helpful to establish an In-Kind Review Committee. Their members should be composed of people who have expertise and experience in the different technical fields, so that they are able to evaluate the proposals. Their tasks are:

  • to verify that the interested contributor has the expertise, technical means and financial support to deliver the proposed contribution
  • to assess whether the quality is guaranteed
  • to investigate if the IKC makes sense and further on
  • to recommend the allocation of the contributions by the leading managing group

4. Select the IKC (Which in-kind contributions do we need?)
This question should be discussed with all relevant people like technical or service groups. Their ideas should be reviewed by the project board and presented to the IKRC.

5. Allocate the IKC
The technical or service recommendations are presented to the Administrative and Finance Committee (AFC) who add the financial recommendations. Both the technical/service and the financial recommendations are the base of allocation by the leading managing group. The contracting RI parties designate the donors and enter into commitments to contribute towards service or construction costs.
Quicker IKC allocations and thus direct decisions by the managing board without the way over the AFC should be possible, if the value of the IKC is below a specific amount (for instance < 1M€).

6. Establish an in-kind contribution agreement for each task
Including all expected in-kind contributions in your budget by reporting will help to identify the resources you need to complete a task and illustrates the total cost of a particular activity. Keeping good records are required by many donor organizations and also acknowledge partners for their contributions, which can be important in maintaining strong relationships. It provides a central collection point of contributions you receive enhances your financial sustainability and helps to leverage resources.
For each IKC you need two documents, an agreement with the contributing institute detailing the technical issues and an agreement with the shareholder containing the financial details and crediting milestones. These include links to reference documents as research infrastructure convention, list of shareholders, cost book with detailed cost estimate, basic rules and procedures for IKCs and if applicable a document with more detailed rules and procedures.

7. IKC follow-up
IKC follow-up means the validation of milestone’s achievement. The progress of a contribution is monitored through specific contractual milestones detailed in the agreement like name, date expected, validation criteria, date of validation, delay and so on. The milestone validation process involves 4 steps: credit request > credit request control > verification and the validation itself. The successful validation will be confirmed by a certificate of validation to be physically signed by the responsible persons.
Usually a project contains several hundreds of milestones; it is mandatory to establish a milestones database for future traceability, including the validation certificates and attached documents.

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Examples IKC follow-ups

Procedure of in-kind contribution milestone validation2


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Certificate of Validation2


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Which topics could a document of rules and procedures for in-kind contributions contain?

The following detailed list of items should serve as suggestion:


  • Definition of IKCs (technical, service, personnel, …)
  • Crediting of the value
  • Rules and processes of Production, delivery, adjustments
  • Processes and liability in case of cost changes, delays, deficient delivery
  • Final assessment, passage of title, disputes

In-kind Review Committee

  • Requirement of formation of an In-kind Review Committee (IKRC)
  • Determination of its composition and role
  • Determination of issues as chair, meetings, voting rules
  • Determination of some specific items like
    • Conflict of interests
    • In-kind unit at the Company, supporting the chair
    • (close) Relationship with other bodies of the project
  • Early definition of interphase specifications and common standards regarding to tasks with common interfaces.
  • Definition of Rules of procedures (as annex)


  • Requirement to establish an IKC-agreement for each contribution
  • Assignment o Responsibilities & credits
  • Involvement of the user community

Elementary items of the agreement (financial details) with Shareholder

  • Financial value of IKC
  • Crediting milestones
  • Legal clauses and provisions

Elementary items of the agreement /Technical/service details) with institute

  • Description of deliverables (technical/service)
  • Specifications
  • Time schedule
  • Conditions of acceptance
  • (Transfer of) ownership and Intellectual Property (IPR) clauses
  • Quality Management issues
    • Agreements on production, delivery, adjustments
    • Developments also guided by an expert group
    • Review mechanisms (assessment procedure)
  • Valuation of costs, cost changes
    • Pre-definition of milestones
    • Proof of functioning after assembly
  • Settlement of disputes (delays, deficient delivery, risks)
    • Clear regulations from the outset
    • Exposure to cost overrun by IKC provider
    • Assumption of liability in case of delays or under-performance. Assumption of its impact on work packages downstream

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Example of an IKC agreement
Structure of IKC agreement of the European XFEL2
  • Preamble
  • Scope of the agreement
  • Basic documents (inclusive annexes such as
    • Description of IKC
    • Technical specifications
    • List of equipment to be produced
    • Manpower requirements)
  • Time schedule, milestones, deliverables
  • Quality control, performance testing, acceptance, transfer of property
  • Value and resources
  • Coordination and spokespersons
  • Definitions
  • Exchange of knowledge
  • Confidentiality
  • Intellectual Property
  • Publications
  • Inventions
  • Liability
  • Continuing application of provisions
  • Disputes

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Example of basic rules and procedures for IKC
Basic rules and procedures for in-kind contributions of the European XFEL2
It emerged that this content had been less detailed. An additional more detailed document (internal provisions) has been established.



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How do I make sure that an in-kind contribution will be successful?

Here a few advices:

  • Make the cost estimate as precise and as close to reality as possible
  • Make sure that the candidate contributor has the right competences and technical means
  • Define the contribution in terms of performance specifications instead of detailed design requirements, so that the contributor is free to bring his know-how and added value
  • Make sure that the specifications are exhaustively defined and well understood before execution of the contribution
  • Make sure that the interfaces are fully defined before execution of the contribution
  • Define precisely the responsibilities of the different parties
  • Foresee a plan B in case of high risk existing in specific issue
  • Define precise processes for the validation of achievements at milestones
  • Define precisely the process of transfer of ownership
  • Consider the contributing institute as a partner, not as a vendor
  • Make a close follow-up and reporting

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How do I manage in-kind contributions?

During the project process or in operation you have to manage in-kind contributions inter alia using methods like quality assurance and risk management.

System integration

  • IKC agreements should follow an established template agreed by the leading managing group and by the shareholders
  • Coordination, specification of interfaces, compatibility of IKCs from different partners
  • Effective centralized supervision and follow-up required, 100% IKC is not realistic
  • Build-up of competence for operation of RI

Cost increases, delays, under-performance

  • Clear regulations necessary from the outset
  • Cost overrun to be borne by IKC provider
  • Difficult: liability in case of delays or under-performance; impact on work packages downstream

Acceptance and crediting the value

  • By pre-defined milestones to be validated by the technical teams
  • Final acceptance by proof of functioning after assembly and integration, then transfer of property

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Which challenges you have to cope with in-kind contributions?

Technical difficulties:

  • Different environment (procedures, language, CAD software, units…)
  • Different standards
  • Different raw materials (same quality ?)
  • Different style of management
  • Follow-up is difficult


  • Budget is in current prices, but IKCs are e.g. in 2005 prices
  • Controlling: follow-up of IKC milestones


  • Transports
  • On-time delivery and temporary storage
  • Integration plan


  • National legal rules are different
  • Procurement rules are different
  • Customs from outside EU


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Which specific finance and controlling aspects of do you have to be aware of?


  • The guideline for the budget is the financial estimate of the project, in the sense of an agreed cost limit.
  • The budget sheet should be regularly updated of the due to yearly index changes.
  • The transfer of ownership should be precisely defined in the IKC agreement
  • It would be good to define an index of completion based on physical achievements, apart from the financial status

Close follow-up of IKCs

  • Done by the IKC coordinator, the finance group and the controller
  • The controller has to check the value and compares it what is foreseen in the budget. In case of a difference (not included or with a higher value than foreseen), a decision by the management is needed. The controller includes the value into his project reports.
  • In case of a new IKC originally foreseen as cash (or the opposite case): the controller is involved to take care of shifted value.

Milestone is achieved

  • All milestones achievements are reported by the IKC Coordinator
  • For each completed milestone the accrued value is notified to the shareholder
  • Single tangible object (with transfer of ownership)
    • It must be shown in the balance sheet as “fixed assets under construction” with its milestone value
  • Object with no transfer of ownership
    • no entry in the balance sheet is made
    • accrued value is notified to the shareholder
  • Intangible objects/prototypes (like design drawings, reports and documents)
    • are to be seen as part of the complete IKC in which case the transfer of ownership will only take place at the completion of this IKC

Tasks if contribution is completed

  • The transfer of ownership of the complete IKC is effective after final acceptance
  • The remaining value must be added to the balance sheet
  • Booking entry in the balance sheet:
    • Debit is entered as “fixed assets under construction”
    • Credit is entered as “capital reserve of the involved shareholder” as counterpart of the IKC delivery

Specific cases

  • should be checked and validated in advance by legal experts in order to avoid legal problems (watch out for different local laws)

Example: Single tangible object is delivered by Institute A to Institute B for integration into a whole assembly

    • The transfer of ownership of the single object to the project is still effective through an acceptance certificate
    • In addition there is a transfer of responsibility of the object from A to B, and
    • The transfer of ownership of the whole assembly (except for the single object) takes place at the delivery of the assembly by B


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Examples and experts on in-kind contributions

Example: European XFEL is a project where about 50% of the partner contributions are done by in-kind contribution and IKC agreements are in the implementation phase.


Experts: Serge Prat and Karl Witte (retired), European XFEL

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1 Source: 1308670178S2_Negotiating_IKC.pdf
Workshop: RAMIRI Workshop Amsterdam 2011
Date: 14.-16.06.2011
Author: Karl Witte
Project: EXFEL
2 Source: A9R1DA1 Mgmt and control of IKC case study.pdf
Workshop: RAMIRI Workshop Trieste
Date: 17‐20 June 2012
Author: Serge Prat
Project: EXFEL
3 Source: 5_XFEL_Witte.pdf
Workshop: 3. EC EoE
Date: 28.05.2010
Author: Karl Witte
Project: EXFEL


Source: 07_distributed_RI-WouterLos.pdf
Workshop: 4. EC EoE
Date: 15.12.2010
Author: Wouter Los
Project: LifeWatch
6 Source: 8_in_kind_contributions.pdf
Workshop: 2. EC EoE
Date: 30.10.2009
Author: Alain Lichnewsky
Project: Genci


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